BBA LIBOR: Overnight rate falls for second day

Today’s BBA LIBOR overnight sterling rate has fallen back for the second day running after three days of rising levels.

The rate struck at 12 noon today is 6.01 per cent, a fall from yesterday’s rate of 6.11875 per cent. The fall is further evidence that banks’ immediate concerns about recent market movements are abating. Their concerns about short-term volatility in the markets are allayed, although longer-term concerns about the impact of the sub-prime mortgage slump may remain. The overnight sterling rate of BBA LIBOR is valuable because it is uniquely sensitive to changes in banks’ risk assessments, which in volatile markets may change quickly.

BBA LIBOR (British Bankers’ Association London Interbank Offered Rate) is a daily measure of the rate at which large banks will lend to each other in the London market. The rate for overnight borrowing in sterling is considered a particularly useful barometer of the UK banking sector’s attitude to risk in the financial markets. If the rates are significantly above the interest rates as set by the central bank, or government, it indicates that lenders are more worried about defaults on loans. In recent days the rate has moved quite dramatically above the Bank of England base rate (currently 5.75 per cent):

Wednesday 8th August 5.85 per cent
Thursday 9th August 6.165 per cent
Friday 10th August 6.475 per cent
Monday 13th August 6.50 per cent
Tuesday 14th August 6.11875 per cent
Wednesday 15th August 6.01 per cent